Bybit Arbitrage is a trading tool that simplifies arbitrage trading by capitalizing on funding rate and price differences.

If you're seeking consistent returns with minimal risk, Bybit Arbitrage is the perfect ally.

 This robust tool empowers you to generate regular profits with minimal risks by capitalizing on price disparities across different markets. Its user-friendly interface lets you easily spot and exploit these differences, so that you can execute flawless arbitrage trading in the crypto market with confidence. Read on to learn how Bybit Arbitrage makes arbitrage trading an effortless way for you to achieve low-risk gains.

 is the buying and selling of the same or similar asset(s) at the same time across different markets to earn from slight price deviations. This act of purchasing an asset at a fixed price — while simultaneously selling it at a higher price — allows a trader to instantly make profits without any risks. 

While arbitrage trading has long been a staple in traditional financial markets, such as stock and forex, the advent of crypto trading has propelled arbitrage trading to new heights — thanks to the heightened volatility of the crypto market. Additionally, unlike traditional stock markets, crypto markets are traded 24/7, offering more opportunities for arbitrage traders to reap profits from the price gaps across exchanges and markets. 

 across exchanges or within a single exchange. Keep in mind that if you opt to arbitrage trade across different platforms, accessing your profits may prove to be complex, due to the need to transfer your assets between the exchanges, which can take up to several days to complete. On the other hand, arbitrage trading on a single platform is more straightforward — but more competitive as well.

There are multiple arbitrage trading strategies, but the most common ones in the crypto market include funding rates arbitrage, spot-futures arbitrage and futures arbitrage. 

Funding rates arbitrage allows traders to profit from variations in funding rates between 

 contracts. In contrast, spot-futures arbitrage enables traders to profit from price disparities between the spot and 

 for the same asset. Meanwhile, futures arbitrage involves profiting from price discrepancies between futures contracts with different expiration dates.

Bybit Arbitrage is a trading tool that helps traders identify arbitrage trading opportunities in two ways: funding rate and spread. 

The user-friendly interface organizes trading pairs based on either funding rates or spreads in different markets, so that traders can easily spot disparities in funding rate or price across the markets at a glance. 

Bybit Arbitrage is exclusively available to 

 mode. It facilitates arbitrage trading for USDT Perpetual, USDC Perpetual and USDC Futures contracts, thereby allowing you to enjoy arbitrage trading opportunities between USDT 

Spot pairs and USDT Perpetual pairs, or USDC Spot pairs and USDC Perpetual/Futures pairs. 

The Funding Rate Arbitrage feature exploits differences in funding rates between the Spot and Perpetual/Futures markets on the Bybit exchange. With the Funding Rate feature, traders can earn funding fees while simultaneously managing their positions in order to minimize potential losses and maximize gains through positive and negative arbitrage strategies.

Funding rates for the different trading pairs are listed in descending order. This helps traders to easily leverage the interest rate differential between Spot and Perpetual/Futures contracts.

The Funding Rate feature also allows you to 

 orders (with the same amount, but in different directions) in both Spot and Perpetual/Futures, which enables you to earn funding fees while mitigating potential losses (with potential gains).

holders in Futures/Perpetual contracts pay short position holders. You can leverage this situation by executing a positive arbitrage, which involves

 buying a Spot pair and taking a short position in 

Perpetual to earn steady funding fees. Alternatively, if the funding fee is negative, short position holders pay long position holders. In this case, you would perform a negative arbitrage by shorting a Spot pair and going long in a 

The Spread Arbitrage feature helps traders capitalize on price discrepancies between different markets for the same cryptocurrency asset. With this feature, you can easily compare the market prices of an asset traded across various trading pairs and contracts. While Spread Arbitrage may be similar to spot-futures arbitrage, it offers more arbitrage opportunities since it covers a broader range of markets, unlike spot-futures arbitrage, which targets specific markets

With Spread Arbitrage, the aim is to profit from the eventual price convergence as you buy the crypto asset at a lower price in one market (e.g., Spot) and sell it at a higher price in another market (e.g., Futures). 

As the futures price will eventually align with the Spot price when the contract expires, you’ll be able to take advantage of the simultaneous price disparity for the same asset.

In order to trade with Bybit Arbitrage, you’ll first need to 

. Currently, Bybit Arbitrage is exclusively accessible via the 

 for the web version, which will be launched soon!

Bybit Arbitrage offers multiple advantages.

Bybit Arbitrage is a powerful tool for traders seeking low-risk gains in the volatile crypto market. With its intuitive interface and exclusive features, traders can effectively leverage funding rate and price differences to maximize profits while minimizing risks. Bybit Arbitrage offers diverse benefits that make arbitrage trading more accessible and profitable than ever before.

Beginner

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How to Use Bybit Arbitrage to Achieve Funding Rate and Price Difference Arbitrage

An Ethereum Spot ETF is an exchange-traded fund that tracks the real-time price of Ether and allows investment through traditional stock markets. Learn more.

Earlier this year, the U.S. Securities and Exchange Commission (SEC) gave the green light to a number of Bitcoin Spot exchange-traded funds (

), sparking optimism that similar approval might be extended to Ethereum Spot ETFs. Adding to the excitement, news of Ethereum Spot ETF approval in Asia’s first region has heightened anticipation for a potential approval and launch in the U.S. However, despite the buzz, some industry observers remain skeptical. This article explores the potential impact of Ethereum Spot ETF approval on the broader crypto market.

An Ethereum Spot ETF is an exchange-traded fund that tracks the real-time price of 

 and allows investment through traditional stock markets. It offers investors a way to invest in Ether without having to actually buy or hold the asset itself.

An Ethereum Spot ETF operates by pooling investor funds to purchase Ether, which is held in reserves by the ETF.

Rather than navigating the complexities of 

 and exchanges, investors buy shares of the ETF through regular brokerage accounts, just as they would with traditional stocks. These shares represent a stake in the Ether held by the ETF, providing a simple and regulated way to own Ethereum indirectly.

In order to create ETF shares, authorized participants — usually financial institutions — purchase Ether in exchange for ETF shares of equal value, which are then sold onto the market. An authorized participant can also redeem shares by buying enough ETF shares and exchanging them for Spot Ether and taking those shares away from the market.

As a result, the price of ETF shares tends to fluctuate in line with Ethereum's Spot market price. If it didn’t, there would be an 

 opportunity to profit from any mispricings in the ETF price. However, it’s still theoretically possible for the ETF to trade at different prices simply because of supply-and-demand factors.

ETFs as securities are regulated by the SEC, so an Ethereum Spot ETF provides a regulated product that investors can purchase. By contrast, Spot Ether is being investigated by the SEC to determine whether it should be classified as a security, and currently lacks regulatory clarity. 

This setup offers numerous benefits for investors. It simplifies the investment process, allowing anyone with a brokerage account to invest in Ethereum without setting up a crypto exchange account or managing storage. This can save time and give some investors greater peace of mind. An ETF structure also provides the regulatory clarity that institutional investors need, which can enhance liquidity and trading volumes.

Security is paramount in the realm of cryptocurrency, and the ETF provider takes it seriously. To safeguard Ether holdings, ETF providers employ a combination of 

 and insured custodial services. As a result, they could potentially minimize the risk of theft or loss that individual crypto investors may encounter.

The Ethereum Spot ETF bridges traditional finance (TradFi) and the exciting (but still growing) cryptocurrency space. It offers the security and ease of trading associated with traditional financial markets while opening up investment opportunities in Ethereum for a broader audience.

Both excitement and regulatory scrutiny characterize the current landscape of Ethereum Spot ETFs. Major financial institutions like 

 and Fidelity have submitted applications for these ETFs to the SEC. Still, decisions have been delayed, with the next 

If applicants begin updating their filings by April, this may indicate they’re incorporating feedback from the regulator, which could be interpreted as a positive sign. However, a lack of updates to filings could indicate that the SEC isn’t maintaining the same level of discussions with issuers that led to its 

Another challenge is that the SEC is still investigating whether Ether should be classified as a security, especially since it transferred its consensus mechanism to 

. Earning rewards through staking could meet criteria that determine whether an asset is a security. Ethereum also provides a foundation for 

 (DeFi), which could add to the complexity of the review. 

Analysts' opinions vary regarding the likelihood of ETH ETF approval. One Bloomberg analyst, for instance, 

 chance of approval by May. However, the SEC's recent silence might hint at a less favorable outcome.

The approval of Ethereum Spot ETFs is eagerly awaited because it could mirror the impact of Bitcoin Spot ETF approval, which led to an influx of capital in the market. It would mark a pivotal milestone, likely to attract increased investment and further validate cryptocurrency. The crypto community is closely monitoring these developments, as the coming months will be crucial in shaping the future of Ethereum investment opportunities.

 was recently given to the first Spot Bitcoin and Ethereum ETFs in one of the Asian regions. This landmark decision positions the city as a trailblazer in the Asian financial landscape, embracing the integration of popular cryptocurrencies into mainstream investment avenues.

This milestone has sparked excitement within the crypto community, indicating a positive reception toward digital assets in that region. Analysts believe this move could set a precedent for other jurisdictions to follow, potentially leading to broader acceptance and recognition of cryptocurrencies as a legitimate asset class.

These newly approved ETFs are expected to attract a wave of fresh investors — both retail and institutional — by offering a regulated and familiar investment option for exposure to cryptocurrencies. This growth of interest could increase stability in the crypto markets, possibly influencing the price movements of Bitcoin and Ethereum in the region.

The timing of this approval is noteworthy, considering that the U.S. could also be on the cusp of approval of an Ethereum Spot ETF. If this proactive approach inspires other financial centers beyond the U.S. to consider similar approvals, it will palpably contribute to the global expansion and maturation of the cryptocurrency market.

Current Impact of Ethereum Spot ETF Applications on the Crypto Market

The buzz surrounding Ethereum Spot ETF applications is noticeably affecting the crypto market, particularly Ethereum's price and overall sentiment. Submission of new ETF applications to the SEC has coincided with an 

, pushing it to around $3,700. This uptick reflects the market's optimism and positive sentiment regarding the potential for easier access to Ethereum. However, the market has exhibited some volatility as well, with Ether dropping over 14% in a week in early April. 

Despite these fluctuations, there's a general expectation that ETF developments would significantly impact Ethereum's price dynamics, similar to what was observed with the recent Bitcoin Spot ETF approvals. Moreover, the recent approval of cryptocurrency ETFs has further fueled optimism and positive expectations for increased investment inflows and a broader recognition of cryptocurrencies.

To sum up, the current impact of Ethereum Spot ETF applications on the crypto market is marked by heightened anticipation along with some volatility. Ethereum's price is responding to changes in the regulatory landscape and the potential for broader adoption of cryptocurrency-based investment products.

What Will It Mean if an Ethereum Spot ETF Application Is Approved?

The approval of an Ethereum Spot ETF application by the SEC would mark a significant milestone for the cryptocurrency market, especially for Ethereum. Following are some of the potential benefits.

Drawing parallels to the earlier Bitcoin Spot ETF approvals, some pundits expect an initial surge in Ethereum's price following the expected announcement, reflecting renewed confidence and interest in Ether as an asset. Over the long term, Ethereum Spot ETFs could contribute to growth and stability, similar to the impact that Bitcoin Spot ETFs have had on BTC’s price.

However, there are key differences to consider. The SEC's cautious stance on Ethereum — notably because of its PoS consensus mechanism — could influence the approval process and subsequent market reactions. In addition, Ethereum's unique ecosystem, including its role in DeFi and 

, could lead to different market responses as compared to those following the Bitcoin Spot ETF approvals.

The potential approval of Ethereum Spot ETFs is a crucial turning point for the crypto market, promising easier access, increased investment and greater legitimacy. Although short-term price fluctuations may occur, the long-term effects could echo the positive growth recently witnessed with Bitcoin Spot ETFs, promoting a more mature investment environment for Ethereum.

Intermediate

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Ethereum Spot ETF Approval: Its Impact on Crypto Markets

Grayscale Investments has filed a registration statement on Form S-3 with the SEC to register shares of its Grayscale Ethereum Trust (ETHE) as part of efforts to uplist the trust to a spot Ethereum ETF on the NYSE Arca.

Daily Top Performer — Automata Network (ATA)

The SPX index is up 0.02%, investor focus on earnings and U.S. interest rates continues. The broader cryptocurrency market is down, with Bitcoin and Ether dropping by 3.78% and 2.41%, respectively in the past 24 hours.

Today’s outperformer is ATA, which jumped 8.9% after Automata launched Multi-Prover AVS on Eigenlayer Holesky Testnet to boost decentralized security.

Automata Network (ATA), founded in 2019, is a Web3 platform providing private web services for decentralized applications, focusing on secure, anonymous transactions and governance. Key features include a private voting system and MEV minimization to enhance user privacy and security. Automata's Multi-Prover AVS, which utilizes TEE Coprocessors to enhance security, is now available on the Eigenlayer Holesky testnet. This system employs the TEE Prover as a secondary security measure in decentralized systems. Operators, restakers, and developers are encouraged to learn more about this advancement on their website.

Check Out the Latest Prices, Charts, and Data of 

Grayscale Investments, the world's largest crypto asset manager, has filed a registration statement on Form S-3 with the SEC to register shares of its Grayscale Ethereum Trust (ETHE) as part of efforts to uplist the trust to a spot Ethereum ETF on the NYSE Arca. This filing follows NYSE Arca’s application and is a crucial step in the regulatory process required for offering shares continuously upon approval. The shares will not be sold until the registration is declared effective, and this offering is subject to the Securities Act of 1933. Grayscale emphasizes that the trust, not registered under the 1940 Act, involves high risk and volatility, is focused solely on Ethereum, and does not offer direct investment in Ethereum.

BlackRock's spot bitcoin ETF, IBIT, has significantly impacted the firm's overall ETF flows, comprising 24% of its total. Eric Balchunas, Bloomberg's Senior ETF Analyst, highlighted the fund's success during a panel on Hong Kong's newly approved spot crypto ETFs. Since its launch in January, IBIT has attracted consistent inflows for over 70 days, accumulating more than $18 billion in assets under management and becoming one of the most successful ETFs in history. The IBIT fund is second only to Grayscale's ETF in terms of assets but has seen remarkable trading volume along with other spot bitcoin ETFs, totaling nearly $230 billion.

Gamium, supported by Parachain Ventures, DAO Maker, and Mr. Beast among others, has its token $GMM listed on major exchanges with a fully diluted valuation of around $43M. The platform is promoting a beta points airdrop to reward early users, where participants can sign up and earn points through various activities like launching an MST, trading, daily logins, and referrals. Details on point earning and distribution are available in a dedicated blog post. However, potential users are cautioned to research due to the inherent risks associated with DeFi protocols and trading.

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Grayscale Files for SEC Registration to Convert Ethereum Trust into a Spot ETF on NYSE Arca

Sharky is a Solana-based lending and borrowing DeFi solution that utilizes NFTs as loan collateral.

Cryptocurrency lending and borrowing has always been a prominent niche of the decentralized finance (

) industry, championed by platforms like Aave (

). A much rarer variant of DeFi borrowing and lending is based on non-fungible tokens (

Sharky.fi, or simply Sharky, is a Solana-based lending and borrowing protocol that uses NFTs as collateral to facilitate the DeFi processes on the network. By putting up NFTs as collateral, users can borrow funds via short-term loans in Solana's native SOL tokens. For lenders, the platform is also a great way to earn high APY rates in just 7 to 14 days, while having their loaned funds protected by the NFTs.

Having established itself as the leader of NFT-based lending and borrowing on Solana, the Sharky project has ambitious plans to integrate two more highly popular crypto asset types — Ordinals and real-world assets (RWAs).

 (SHARK) is a lending and borrowing app on the 

 (SOL) blockchain that lets users provide NFTs as collateral to access short-term loans in SOL tokens.

 Lenders can view NFTs offered as collateral, and make loan offers secured by their preferred NFTs.

Although Sharky's public launch on the Solana mainnet dates back to April 2022, the platform operated without its 

, SHARK, for its first two years in the market. The SHARK token was eventually launched in mid-April 2024.

Using its innovative business concept, Sharky quickly established itself as the leader of NFT lending. According to the project’s team, Sharky has a 90% share of the NFT lending market on Solana and has issued more than 1.4 million NFT loans.

Following the recent launch of its SHARK token, the project aims to integrate additional crypto asset types in the future. These include 

 (RWAs). Another ambitious product type considered for future implementation on the platform is uncollateralized consumer loans.

As a lender on Sharky.fi, you can browse NFTs from a variety of collections offered on the platform and make a loan offer for potential borrowers. The collections available on Sharky include the platform's own 

 collection, Mad Labs, Solana Monkey Business (SMB), Tensorians, Namaste and more. Lenders’ offers are shown to potential borrowers on the platform, who then choose the best offer based on their borrowing needs.

The NFT provided by the borrower is used as collateral, and the lender makes their funds available in SOL tokens. Lenders earn interest on the funds, with the loan duration typically between 7 and 14 days. Interest rates, naturally, will vary depending upon on-platform activity. Usually, 

 for active loans range between 120% and 220%, though they can go up to 360%. As such, Sharky loans are an excellent way for lenders to earn some serious interest quickly. If a borrower fails to repay the loan in full, the NFT used as collateral is transferred to the lender.

For borrowers, the Sharky platform is an excellent opportunity to access SOL funds for short-term needs quickly and flexibly using their NFTs, rather than cryptocurrency, as collateral. The best part of the platform's borrowing mechanism is that you remain in possession of your NFT during the loan period as a borrower. While your NFT is used as collateral, its ownership isn't transferred to the lender while the loan is active. The ownership transfer may only happen at the end of the loan period if you fail to repay the loan in full.

Maintaining the ownership of your NFT allows you to keep using it on various DeFi and other apps for purposes such as staking or satisfying 

 eligibility requirements, among other potential uses.

Sharx is the platform's own NFT collection. One of the most popular collections used in Sharky's lending and borrowing operations, sharx is made up of 10,111 adorable shark characters. Purchasing a sharx NFT not only opens up borrowing opportunities but also entitles you to upgrade or boost your Chowder points, rewards that are used in Sharky's loyalty program. 

As a sharx holder, you're entitled to the airdrop of Sharky.fi’s governance token, SHARK, and you can also stake sharx to earn FISHY tokens.

The newly launched SHARK token is envisioned as the platform's governance asset, with a total supply of 100 million. As of the time of writing in late April 2024, only some specific details on the actual governance processes powered by SHARK are available. Thus, the token's actual use in on-platform governance is expected to be outlined in the future.

SHARK will be airdropped in two phases, with 4.25% set aside for the first phase and 3.5% for the second. Of the former, 70% is allocated to its community, with the remaining 30% is distributed to partner communities. Meanwhile, the second phase is held as a staking pool event with a lockup duration of 30 to 60 days exclusively for OG, new users and sharx holders.

 of Sharky. Unlike the brand-new SHARK token, FISHY was issued back in 2022 at the start of the platform's operations. FISHY can be earned by staking sharx NFTs, accumulating reward points and participating in Sharky's social media campaigns. The token can be used to boost sharx NFTs, which in turn can earn you additional Chowder points. FISHY also gives you access to NFT raffles and auctions held on Sharky.

The SHARK token can be bought on Bybit through a Spot pair with USDT (

). Additionally, you can also take part in Bybit's current campaigns for the token for the chance to grab a share of the 

, which includes a Token Splash event featuring 456,000 SHARK through Apr 30, 2024, 9AM UTC, and a Lucky Draw with 58,000 SHARK in rewards through Apr 30, 2024, 9:59AM UTC.

Lending and borrowing using NFTs as collateral is a novel concept that has earned Sharky leadership positions in this niche. As more platforms adopting this business model emerge, the competition in the field is likely to intensify. However, as of now, Sharky remains the absolute leader of the Solana-based NFT lending and borrowing market. 

As NFTs experience a resurgence in popularity following the post-2021 dip, DeFi solutions that make innovative use of these assets, such as Sharky, stand to benefit. Later in 2024 and beyond, we’ll likely hear more about NFTs being used as legitimate collateral in crypto finance — a new trend helped to no small degree by the Sharky platform.

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Sharky.fi (SHARK): The Decentralized Platform for Instant NFT Loans

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Curious about recent crypto-related Chapter 11 bankruptcy filings? Find out how it differs from traditional bankruptcies and the crypto implosion that ensued.

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What is a Chapter 11 bankruptcy, and how does it differ from others? Chapter 11 bankruptcy can protect a company, while leaving investors without repayment of debt owed. A crypto bankruptcy repayment plan can vary from other types, especially when debt is considered unsecured. In this article, we’ll define Chapter 11 bankruptcy and examine its effects on the average crypto investor.

Chapter 11 bankruptcy is commonly referred to as “reorganization” bankruptcy. Crypto investors need to know what a Chapter 11 bankruptcy is, and how it can affect them.

Chapter 11 and Chapter 7 bankruptcies might seem similar, but they’re very different. One bankruptcy involves liquidating assets, while the other one reorganizes debts. When a company is in dire financial straits, they can choose between several types of bankruptcies. Chapter 11 and Chapter 7 are the most common types. 

Chapter 7 is often referred to as a "liquidation" bankruptcy, as businesses move past the initial stage of reorganization and focus on selling off their assets. Usually, the bankruptcy court appoints a trustee to ensure all creditors receive payment in the correct order, which follows the rules of absolute property. For example, secured debt takes precedence over any unsecured debt. As a result, secured debts are the first to be paid. Once they’re paid off, the remaining cash and assets are pooled and distributed to creditors with unsecured debt.

On the other hand, Chapter 11 bankruptcy is intended to reorganize a business. It’s a complex form of bankruptcy. Not only are the filing fees expensive for Chapter 11, but the business must head to court several times during the reorganization process. Unlike Chapter 7, Chapter 11 bankruptcy allows the company to reorganize debts, emerging as a healthier business.

Companies that want to file for Chapter 11 bankruptcy must request a bankruptcy court hearing. During this process, the debtor remains in business while trying to stabilize their company. These stabilization efforts may include selling off assets, cutting expenses and attempting to negotiate with debtors. All of these actions remain under the supervision of the court.

Debt is not absolved in a Chapter 11 bankruptcy, meaning the restructuring only changes the debt terms. The debtor must pay back the creditors with future earnings. When a company successfully emerges from Chapter 11, it operates with a newly structured debt. Unfortunately, if Chapter 11 is unsuccessful, the business will file for a Chapter 7 bankruptcy, and the company may then liquidate its assets to pay off debts.

Let’s look at the differences between a Chapter 11 and Chapter 13 bankruptcy filing.

There are fundamental differences between Chapter 11 and Chapter 13 bankruptcies. Filing for Chapter 13 must implement a plan to repay the debts within three to five years. In most cases, the debtor may keep some assets. Chapter 13 bankruptcy filers often pay a monthly amount to a trustee, who then pays the creditors.

Chapter 13 bankruptcies require a trustee. However, Chapter 11 bankruptcies make this optional, and the trustee isn’t needed in most cases. The trustee reviews the bankruptcy proposal, makes recommendations to the court and distributes creditor payments. The Chapter 11 process can often be drawn out, taking several years to complete. Chapter 13 bankruptcy has a shorter approval process than Chapter 11. However, all disposable income must be made available to the trustee for distribution to the creditors during the repayment process.

What Happens During a Chapter 11 Bankruptcy Filing?

All Chapter 11 bankruptcies start with a petition filed in court. To qualify for Chapter 11, the debtor must not have any past bankruptcies deemed "non-compliant" by the courts. With the filing, the debtor must submit an income and expenditure schedule. The business must also list assets, liabilities, unexpired leases and executory (still to be fulfilled) contracts. Once the debtor files the petition, the company assumes the role of "debtor in possession," meaning that it retains control of operations and assets during the reorganization process.

The petition includes the debtor’s following information:

When the court receives the petition, it charges a $1,167 filing fee and an administrative fee of $500. The fee must be paid in whole or as installments to the court.

The company must also file a plan of reorganization and disclosure statement with the court. The reorganization plan will contain the classification of debt claims and the treatment of each one. If the creditor has an impaired claim, the creditors can vote to accept or reject the plan of reorganization through balloting. A creditor's claim is considered impaired when the original terms of the debt change in a negative way, such as lengthening the payout period or reducing the interest rate.

A disclosure statement contains details about the debtor's liabilities, assets and business affairs. This information often allows the court to make informed decisions about the plan of reorganization. After the court has reviewed the disclosure statement and tallied the creditors' votes, it conducts a hearing on confirming or denying the plan of reorganization.

Since the Chapter 11 bankruptcy puts the debtor "in possession," the debtor is responsible for handling several functions, such as accounting for assets, filing reports with the court and examining any objections to claims. With the court's approval, the debtor in possession may employ professionals to help with these duties. These can include auctioneers, accountants, attorneys and appraisers.

Sometimes, a trustee may be required to monitor the debtor's progress in these reporting requirements. If the debtor in possession fails to comply with specific reporting requirements, the trustee may file a motion to dismiss Chapter 11, or have the case assigned to another bankruptcy chapter.

Some businesses may ask, "What is Chapter 11 bankruptcy, and how can it help with current judgments?" During this time, an automatic stay order goes into effect, suspending all foreclosures, collection activities, judgments and repossessions that occurred before the petition. Once the petition is filed, the stay against the creditor(s) immediately goes into effect. As a result, the debtor will have a chance to hold negotiations to resolve any financial distress. In some cases, secured creditors may apply for relief from the automatic stay to foreclose on assets and receive sale proceeds to satisfy their debts.

Once the Chapter 11 bankruptcy is filed, the debtor must have a plan within 120 days. Occasionally, the court can grant another 180 days to receive a confirmation for the plan. The plan's creditor claims are designated into classes for treatment in the reorganization plan. Additionally, the plan lists creditors in order of priority for repayment, with secured debts at the top of the list.

In a Chapter 11 bankruptcy, an entire class of creditors must approve the reorganization plan. At least two-thirds of creditors, or one-half of the allowed claimants, must accept the reorganization plan. Also, it needs to be approved by one class of creditors who have impaired claims. After that, the reorganization plan is considered accepted by the majority of creditors.

Even if a class of creditors objects, the plan may move on, as long as specific requirements are met. The reorganization plan must be equitable and must not discriminate against a particular class of creditors. If there are no objections, the court will confirm the plan, which must comply with the rules outlined for Chapter 11 bankruptcy. After a ruling in court, the plan becomes binding and defines how the debts will be treated.

However, the court may decide not to accept the Chapter 11 bankruptcy reorganization plan. In this situation, the court can either convert the case to a Chapter 7 bankruptcy filing or dismiss it. A rejection of the plan will return the business to the same status as before the filing. With that, creditors may opt for a non-bankruptcy filing to protect their interests.

We’ve described what a Chapter 11 bankruptcy is — but what does it mean for crypto firms? Let’s find out, as some companies have filed for

 or crypto-related Chapter 11 bankruptcies to protect their assets.

What Happens to Existing Investors If a Crypto Firm Files for Bankruptcy?

When a crypto firm files for a crypto-related or Bitcoin Chapter 11 bankruptcy, their stocks and bonds continue to trade on the exchange, allowing them to proceed with normal business operations. Any firm facing a crypto bankruptcy must report its changes to the SEC. With the announcement of a Chapter 11 bankruptcy protection, there’s a risk that shares could lose their value. The announcement of a Chapter 11 bankruptcy may cause a company’s stocks and bonds to plummet, despite the reorganization plan put in place to satisfy creditors. 

Unfortunately, investors are the least protected entity in a crypto bankruptcy. Custodially held crypto assets are considered the property of the bankrupted firm. In a crypto bankruptcy, the asset may be subject to bankruptcy proceedings. In other words, customers could be treated as unsecured creditors. As such, these investors have little or no resources to recover their cryptocurrency or the equivalent cash balance in the event the firm goes bankrupt.

Chain of Events That Led to the Recent Crypto Implosion

News of any crypto bankruptcy often shakes investors. While cryptocurrencies have hit all-time highs over the past couple of years, there’s been a downturn of approximately 75% over the last few months. Crypto Chapter 11 filings have created fear in the market.

Terra Ecosystem Experiences Unparalleled Growth

At one time, Terra (LUNA) was the most successful blockchain platform. Its native token,

, benefited from the growth of the stablecoin known as

 ecosystem started to gain mainstream popularity with many investors. In 2021, LUNA traded at an all-time high of $199. Additionally, the entire Terra DeFi ecosystem was valued at $45 billion.

With Terra’s unprecedented gains, a crypto bankruptcy wasn’t even on the radar for most investors. Many believed Terra would never head toward a crypto bankruptcy with its unprecedented gains. However, there were other indicators that the crypto market was headed for turbulence.

While Terra experienced unparalleled growth, there were signs of cracks in the company. Few people knew that these signs would cause a shift in the entire crypto market.

 closed down the company on May 4, 2022. This action took place days before the collapse of UST and LUNA. After a general shareholder meeting on April 30, 2022, Terraform Labs Korea dissolved its branches in Seoul and Busan. Do Kwon was listed as the liquidator in the crypto bankruptcy filings. After that, the platform began to face more challenges in the market.

The TerraUSD stablecoin, UST, briefly lost its peg to the U.S. dollar, falling to $0.987 on May 8, 2022. UST was once known as the largest

, and some investors considered it the backbone of the crypto economy. Unfortunately, UST lost its peg after the team embarked on a bid to build its

 and Bitcoin reserves. Depegging often occurred when investors made significant withdrawals from

, a lending market that offers high yields to users who deposit UST. Large quantities of UST were also withdrawn from liquidity pools, including withdrawals made by Terraform Lab’s creators.

Panic Withdrawals Cause LUNA and UST to Plummet in Value

After these events, LUNA and UST prices rapidly lost between 70% to 99% of their value. Terra had focused on building its reputation and fame in the stablecoin space, but its price plummeted after the depegging. Unlike most other stablecoins, which are backed by

, UST was backed by an algorithm that maintained its price. To support UST, LUNA had to be minted. As panic set in, investors and traders quickly sold their UST for other currencies, creating a stunning price fall for both UST and LUNA.

Crypto Entities State ‘Extreme Market Conditions’ as Main Reason to Halt Withdrawals

The debacle with LUNA and UST caused panic in the market. In some cases, these extreme market conditions put a halt to withdrawals. When news of the LUNA and UST fiasco hit, the company paused all withdrawals to avoid causing more pain to the fragile market.

 has been one of the most prominent players in the crypto lending space, with over $12 billion in assets and $8 billion in assets lent to clients. However, the move raised concerns about its solvency as the value of its assets fell by half in less than six months. Celsius is the biggest holder of CEL, which has seen 97% of its value erased. Many wondered if Celsius was going to be the next firm to file a crypto bankruptcy, which they eventually did on July 13, 2022.

Major Firms Are Caught Off Guard With News Leaks of Exposure to Terra Ecosystem 

The implosion of the Terra ecosystem caught many of the major crypto platforms off guard, leaving them to wonder about the possibility of more Chapter 11 bankruptcy filings for crypto firms. Only months earlier, UST had been the leading stablecoin in the market. The situation with LUNA and UST sent the crypto market into a tailspin. Like Celsius, many significant firms sought ways to reduce the pain in the crypto market. While these stops may have helped stabilize the market in the short term, they’ve also led to uncertainty and the fear of another crypto bankruptcy announcement.

Hedge Funds, Brokerages and Lending Platforms Face Insolvency Risks

The Terra ecosystem’s weaknesses have highlighted other problems in the crypto marketplace, leading to fear of more Chapter 11 filings. While many crypto lending platforms, hedge funds and brokerages had looked like can't-miss investment opportunities, the past two months have shown that some of them are at risk of insolvency. When these entities file for crypto bankruptcy, there’s hardly any protection for investors, further compounding investors’ fears.

Major Crypto Firms That Have Filed for Chapter 11 Bankruptcy Protection

Along with the woes of the Terra ecosystem, other major firms have filed for their own crypto bankruptcies. Some of these firms include:

Three Arrows Capital (3AC) has backed many projects, including holding approximately $200 million in LUNA coins. With the broad decline in the market, LUNA's prices fell. As a result, 3AC failed to meet its margin call and 

 from Voyager Digital. While Three Arrows Capital didn’t officially file for a crypto bankruptcy, its liquidation was ordered by the court in the British Virgin Islands on June 27, 2022. 

The actions of Three Arrows Capital may have been the cause of

's own crypto bankruptcy. Voyager Digital needed to protect its assets after Three Arrows Capital 

. The service suspended all withdrawals and trades on the platform days before the crypto bankruptcy filing. At the time of its Chapter 11 bankruptcy filing on July 6, 2022, the company held between $1 billion and $10 billion in assets and liabilities.

On July 13, 2022, the Celsius network filed for Chapter 11 bankruptcy. Problems for the company have resulted from the crypto bankruptcy concerns of Three Arrows Capital. The value of CEL, the currency issued by Celsius Network, has significantly plummeted, leading to more problems for Celsius. The fintech platform had claimed it held $167 million in cash, but Chapter 11 bankruptcy court documents indicate a $1.2 billion shortfall.

On November 6, 2022, FTX, one of the largest crypto exchanges, was rumored to have artificially inflated its balance sheet due to overleveraging on its token,

 This created fear that FTX was facing liquidity issues, causing a bank run by its users. This eventually led to the exchange’s pausing of withdrawals on November 8, 2022. On November 11, FTX — together with its trading company, Alameda Research — filed for Chapter 11 bankruptcy, immediately facing almost $8.8 billion in total liabilities. The new FTX CEO, John J. Ray III, has taken command and will be overseeing the bankruptcy process. Ray previously oversaw the bankruptcy of 

Some other firms had exposure to Three Arrows Capital, while one firm had exposure to FTX and Alameda Research. This means they may face a crypto Chapter 11 filing and are at risk of insolvency. A few examples of these firms on the edge of crypto bankruptcy include the following.

Babel Finance, a crypto financial service provider, has temporarily suspended the redemption and withdrawals of crypto assets after the lender failed to pay its clients. Many investors wonder if the company can remain solvent, or must face a crypto bankruptcy.

BitMEX, a crypto trading platform, was on the verge of releasing its token, the BMEX. However, with unfavorable market conditions, the company has decided to postpone the release.

After a counterparty failed to meet a $47 million margin call, CoinFLEX, a crypto platform for earning and trading crypto, halted all withdrawals on June 23, 2022. The company has reopened, but is only allowing investors to withdraw 10% of funds; the remaining funds are listed as locked. Some experts in the crypto industry have wondered whether CoinFLEX is keeping these funds for a potential Chapter 11 bankruptcy filing.

With its exposure to Three Arrows Capital, Finblox, a crypto digital asset platform, imposed a $1,500 withdrawal limit on customers. However, the company plans to raise the limit to $50,000 in the coming weeks for verified users.

According to reports, Genesis Global Trading, a noncustodial crypto OTC market-maker, experienced hundreds of millions of dollars in losses due to its exposure to Three Arrows Capital. Fortunately, Digital Currency Group, its parent company, has helped shield Genesis from some of these losses, preventing a crypto bankruptcy.

, was exposed to counterparty risks and is potentially facing insolvency. It supposedly received financial assistance from FTX and has also paused customer withdrawals.

. It’s also in the process of seeking financial help from other organizations, such as Binance.

Crypto bankruptcy is not uncommon in these uncertain times. Platforms, hedge funds and firms teetering on the brink of insolvency can make any investor nervous. While most investors know what a Chapter 11 bankruptcy is, they may not understand what a crypto bankruptcy can do to their assets. Sometimes, investors may be deemed unsecured debtors, with no means to reclaim any of their digital assets. While understanding what a Chapter 11 bankruptcy is may not lead to recovery of everyone’s funds, it’s important for any investor seeking knowledge and empowerment to become better informed in the days ahead.

Crypto Chapter 11 Bankruptcies in 2022: What You Need to Know

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